U.S., China GDP Growth: America as No. 1

For years, China has been viewed as the world’s dominant growth engine. But that conventional wisdom might have to be reconsidered in 2015.

For the first time since 2006, the U.S. could account for a larger share of nominal gross-domestic-product growth in 2015 than China, according to Bob Doll, Nuveen Asset Management’s chief equity strategist. Doll sees the U.S. eking out the victory in 2015, increasing GDP by $840 billion to China’s $810 billion. (The U.S. remains the largest economy in the world, producing about $17 trillion in GDP annually, versus $10 trillion for China.)

Illo: William Waitzman

Growth from the two goliaths is likely to dwarf the contribution from everyone else. Under Doll’s scenario, the U.S. would contribute 38% of the world’s growth, while China chips in 36%. All of the other countries combined would account for 26%.

What’s more, Doll, who offers these thoughts as just one of 10 predictions for 2015, forecasts that the U.S. could account for more real GDP growth than the emerging-market economies for the first time since 1999.

What accounts for this dynamic? The U.S., Doll says, has benefited from aggressive Federal Reserve actions to spur the economy, and is experiencing a manufacturing renaissance. China, meanwhile, is transitioning its economy from heavy exports and government spending toward more service-oriented businesses. China’s economic drivers like auto sales and freight activity have already been slowing, Doll notes. “Originally, emerging markets were where all the growth in the economy was going to come from,” he says. “Maybe not this year.”

-- Avi Salzman

Last Week

Terrorist Attacks in Paris

Two gunmen believed to be involved in killing 12 people in a terrorist attack in Paris on a satirical magazine that had caricatured the Prophet Muhammad were killed and a hostage freed when police stormed their hideout. Another gunman holding hostages in a kosher market east of Paris was killed, and at least four hostages died. One of the magazine attackers was believed to have received weapons training from an al Qaeda offshoot in Yemen in 2011.

Jobs Grow Smartly

U.S. employment grew a healthy 252,000 in December, and the jobless rate ticked down to 5.6%. But hourly earnings fell 0.2%, which Brown Brothers Harriman says will become problematic for the Federal Reserve if it persists.

Worries Over Global Growth

Fed officials expressed concern about weak growth overseas, and saw trouble abroad as a significant risk to the U.S. economy, minutes to their meeting in December showed. In a rare comment on decisions by foreign central banks, policy makers referenced the urgency being placed on overseas policy actions to counter a slowdown in growth.

Ups and Downs

U.S. equity markets went on a bit of a roller-coaster ride, falling sharply early in the week but recovering later. The Dow Jones Industrial Average finished the week down 0.5%, at 17,737.37, and the Standard & Poor’s 500 index ended 0.7% lower, at 2044.81.

How Low Can It Go?

Oil hit new recent lows on Tuesday, with light, sweet crude futures falling 4.2% to $47.93 a barrel. Prices ended the week at $48.36 a barrel, off 8.2%.
United States Steel
said it was laying off 614 workers, citing the plunge in oil prices.

Data Theft Feared

Morgan Stanley
fired one of its financial advisors, accusing him of stealing account data on some 350,000 clients and posting some of the information for sale online. An attorney for the individual, Galen Marsh, said his client acknowledged obtaining the account information and confirmed to The Wall Street Journal that he was fired. But he said Marsh didn’t post the data online, and wasn’t trying to sell it.

Cushioning Its Capital

Shares of
Banco Santander
sank below that of a 1.26 billion share offering that totaled $8.88 billion. The offering was a bid by the bank to increase its capital cushion.

Proxy Fight at DuPont

Nelson Peltz’s Trian Fund Management stepped up its fight to have
DuPont
split into two companies by launching a proxy fight to add four of its candidates to the board. DuPont said it will review the proposed nominees and make a recommendation that is in the best interest of all shareholders.

Not Retailing Well

Macy’s
shares slumped after the retailer said it plans to save $140 million a year by restructuring its merchandising and marketing operations, which will likely close stores.

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